Month: December 2019

Peter Drucker famously said that the purpose of a business is to create a customer and a customer is defined as someone who pays for the products and services the company offers. This perspective seems to be shared by many in business: as long as revenue and profits are generated, there’s no reason to bother about anything else. It’s all about the money!

Whenever there’s a discussion about morals and ethics, lip service is paid to those questions, but only if there’s a monetary reason for it. For instance, if trading with certain types of industries would be frowned upon by other customers and thus might lead to reduced sales. In this case, the revenue loss with existing customers outweighs the additional revenue and, as a result, the company may decide to not serve those industries. Although the outcome may be the desirable one, the rationale for the decision is pecuniary only.

At the same time, there are many companies out there that are purpose driven and explicitly seek to make the world a better place and improve the state of humanity. In the US, Whole Foods and Patagonia are good examples of this. To paraphrase the former co-CEO of Whole Foods, John Mackey: companies need to make money in the same way as our bodies need to make red blood cells if we want to live. But the purpose of our bodies is not to make red blood cells. Similarly, companies need to go beyond the sole focus of making money.

Interestingly, counter to what one might expect, focusing on purpose proves to be good for making money. Research shows that purpose-driven companies have higher profit margins than their competitors. In “Corporate culture and performance”, John Kotter and James Heskett show that over a decade-long period, purpose-driven companies outperform their counterparts in stock price by a factor of twelve.

The typical reasons why a purpose-driven company might do better have to do with more engaged employees and more passionate customers. With Gallup showing that the percentage of employees engaged in their work is in the low teens across the world, it’s clear that significantly increasing that percentage will do miracles for a company’s productivity and output. Similarly, we know that word of mouth is one of the most powerful and cost-effective ways to reach new customers.

So, why are so few companies explicit in expressing their purpose? One of the key challenges, I think, is that there’s an instinctive fear that expressing a purpose will be viewed as negative by at least some groups in society, resulting in alienating some parts of the customer base. As Simon Sinek so eloquently expressed this: “People don’t buy what you do; they buy why you do it!” The flip side of this statement is that the people that disagree with your why won’t buy from you.

Another reason, I believe, is that expressing a purpose may easily alienate employees. Putting such a stake in the ground may cause some of them to shy away from your business, while they could add value from a technical perspective. The corollary is, of course, that working with people that aren’t aligned with your implicit mission is demotivating as you and others may easily end up pulling in different directions.

The primary reason, however, is that, in my experience, many leaders don’t have clarity on their own purpose nor on the purpose of the company they lead. And when you yourself are unclear on your professional purpose, it’s difficult to express it clearly to others. The key challenge often isn’t whether an aspect of one’s purpose is positive or not, but rather it’s the relative priority of different aspects. When having to choose between revenue and environmental impact, how much cost savings justify what level of impact? Would your company go out with an ad like Patagonia where they showed a jacket with the text “Don’t buy this jacket”? Or, like Tesla, make your patent portfolio publicly available as long as your competitors use it to positively affect climate change?

Doctors have the goal of healing patients. Firefighters aim to protect people and property from damage. Teachers seek to educate the next generation. Business can’t just be about making money. We have the obligation to hold ourselves to a higher standard. What’s the purpose of your company? And how does your mission align with it? And what hard decisions do you take to live up to that purpose and mission?

With Christmas and New Year upon us, I encourage all of us to reflect on why we do what we do. What are we doing to contribute to a world that gets better all the time? Because the world **is** getting better and technology is at the heart of that. But it doesn’t happen automatically. It requires us, as technologists, to explicitly focus on the purpose and meaning of what we do.

Over the last weeks, I’ve been to three different conferences where I heard presentations that were variations on a common theme: if we would just add more structure and more process to the topic at hand, if we would only introduce more steps, more checkpoints, involve more people, and so on, then all the problems we’re experiencing with this product roadmapping, these innovation initiatives, these business development activities, would magically disappear.

Although most would agree that this is obviously wrong, the fact is that in many companies, universities and government institutions, this is exactly what happens. The organization experiences some kind of problem, perhaps even one that may be exposed in the media and makes management look bad, resulting in a top-down order to “fix it”. The subsequent process is obvious for those that have been part of it. First, there’s an activity to describe the process that led up to the issue surfacing. This is followed by a review of all the actions and other factors, with the intent of identifying what went wrong. Finally, a new process is introduced or an existing process is updated to address the perceived limitations, holes or weaknesses in the current way of working.

Once introduced, the next step is to ensure enforcement of the new way of working. Obviously, the new or updated process adds overhead and makes it more difficult to perform the tasks efficiently. So, before you jump the gun and start to work on further complicating the existing processes in the organization, there are five factors I’d like you to consider.

First, one of the concerns that many ignore, but that’s obvious when you think about it, is that the future is fundamentally unknowable. Looking back, we have full knowledge of what has happened. Consequently, it’s obvious what the optimal way to address an issue would have been. However, when standing at the point when a decision needs to be taken, we’re doing so with significant uncertainty about the implications.

Second, depending on the organizational culture, it may be very difficult to point out that individuals have acted out of a fundamental lack of competence. It’s important to realize that incompetence cannot be cured by more process. Incompetence requires educating people or, if that proves unfeasible, replacing individuals with new people.

Third, the more process is introduced and the more enforcement of process takes place, the more people focus their attention on correctly following the process, rather than focusing on accomplishing the desired outcome. This leads to a fundamental lack of accountability in the organization, with everyone hiding behind having followed the process and failing to take responsibility for the desired results.

Fourth, too much process can cause more problems than it solves. As processes are created to be repeatable and to apply to a large variety of different situations, an overly detailed process definition is, by definition, ineffective in the majority of situations. Especially in organizations that place high value on following due process, the inefficiencies and harm done by blindly following process can become staggering, potentially even to the point of companies being disrupted.

Finally, in most organizations that I work with, processes and methods are developed by people that are outside the arena, meaning that they won’t be affected by the implications of the process and method definitions. Although not actually performing the job, there’s a strong tendency to act as “Monday morning quarterbacks”, a reference to the Monday watercooler meetings in especially US companies where the flaws of a team’s quarterback are discussed. The interesting thing is that the criticism tends to come from people that would never ever qualify as quarterbacks themselves.

Concluding, before you fall into the ‘more process’ trap, please ask yourself whether it would help to predict the future better, whether your people perhaps lack competence, whether you promote accountability, whether the root cause is perhaps too much process and whether you’re listening to so-called experts that don’t actually have a sufficient understanding of the situation.